This came after efforts by Treasury Secretary Dr. P.B. Jayasundera to secure a new IMF facility for infrastructure spending failed when the international lender said it was only willing to provide money to improve the Central Bank’s foreign reserves.
According to the Ministry of Finance officials, 75 per cent of foreign debt has been to develop the infrastructure facilities in Sri Lanka.
The Government having failed in securing an IMF facility is now going to raise $1 billion through the National Savings Bank (NSB), they said.
This is the first time that such a massive bond is to be floated by any bank in Sri Lanka. NSB has hired HSBC, Citibank and Barclays to lead manage the international bond sale.
The money would be used to meet the government’s debt obligations, a senior official who wished to be anonymous disclosed.
Economic expert and UNP MP Dr. Harsha de Silva told the Business Times that this move is unwise for the NSB and for thousands of depositors.
He said, “Unless stopped by a court of law, the NSB will go ahead and raise $1 billion for the government at around 7 per cent per annum”.
To spend this money on wasteful infrastructure with no possible return is suicidal, he warned.
It is also a dangerous precedent because the NSB’s business model does not provide for US dollar revenue to repay such a huge borrowing.